Google's Fine

[ Posted Tuesday, April 17th, 2012 – 15:59 UTC ]

The United States government (the FCC, in particular) has just levied a fine on Google, for breaching the privacy of people's emails and other sensitive data. That sounds like a good thing, right? A corporation does something stupid and quite possibly illegal, and they are punished for doing so.

The problem? The fine was $25,000.

Now, that may sound like a lot of money to you. Twenty-five grand ain't peanuts, in other words. Until you compare it to the size of Google itself.

Last quarter, Google made $2.9 billion in profit (not gross earnings, but actual profit). If they keep this pace up all year, they will earn $11.6 billion for the year. Good for them, and good for their stockholders.

But it does put it the fine in a different light. Here are Google's possible earnings this year, followed by the fine just levied upon them:


Let's put it another way. Say you make $50,000 per year, in salary, to pick a middle-class figure out of the air. If you were fined for something bad you did by the government, the equivalent amount (relative to the size of your earnings) would be 10.8 cents. A dime and a penny. If you made $50,000 a year, how much of a financial penalty would 11 cents be? Not a whole lot. You could drop that on the ground while getting change for a purchase, and not even realize it or be impacted much by the loss.

In my town, getting a parking ticket now costs over $50. In my state, getting a speeding ticket costs at least $250, sometimes more. Those are penalties commensurate with the crime, even if a bit high (both state and city have had budget problems and have increased fines to raise money -- parking tickets used to be about $12, for instance). Now, either $50 or even $250 won't break the bank for most people who get caught breaking traffic laws. But it does precisely what it is intended to do: make you think twice before you do so again. Not feeding a meter saves you some quarters, but when you have to pay $50 when you get caught, you definitely think twice before doing so.

But what if a parking ticket cost 11 cents? That's cheaper than buying a half-hour's worth of time, at the meter rates. Nobody would ever feed a meter ever again. The punishment is too light, and everyone would instantly become a scofflaw.

You can debate how big an infraction Google committed. But what is beyond debate is the fact that fining them $25,000 is simply not going to make them think twice in the future about such actions. Why should they? Paying such a trivial amount, to Google, is the metaphoric equivalent of scraping together some loose change from their corporate couch cushions.

I wrote about this last December, on the subject of banks, but it applies to all corporate crime as well:

So here's my proposal: Congress should pass a new schedule of fines. Each would be worded thusly: "the fine shall be $10 million, or 10 percent of the profits the company reported on its annual shareholders' report last year, whichever is larger." That'd be for a minor fine, of course, like a parking ticket. A bigger infraction would lead to, say, "50 percent," or "100 percent," or even higher.

This makes the fine proportional to the size of the business. Which, for all of those "too big to fail" banks, would hit them in their pocketbooks a little harder. Heck, you could even add in "plus all executive compensation for the past year," as well. If the federal budget needs some money, I say this is an excellent place to find it.

In other words, it'd be just fine with me.

In the past four decades or so, politicians have fallen all over each other in a rush to prove they are "tough on crime." Mandatory minimums, long prison sentences, cracking down on crime (virtually all of it non-white-collar crime) gets you re-elected, after all.

I realize today is tax day, and the debate over what tax rate Mitt Romney should pay is raging. But there are other ways of reducing the deficit than taxes. State governments have been hiking fines for precisely this reason. Lawbreakers don't exactly have a big lobbying presence. Even people whose "lawbreaking" consists of not feeding a parking meter. The federal government should do the same thing, and they should start with federal corporate crimes.

Right after the Google story broke, another story appeared, on another federal government agency (the Federal Trade Commission) who is also looking to fine Google for misbehavior. This time, however, the fine they could levy could be as high as $16,000 per violation, per day. Google may have breached the privacy of millions of computer users. If the FTC decides that each one is a separate "violation," then Google could be looking at an enormous fine. One million violations -- even for a single day -- would equal more than Google makes in a year.

Now, I don't expect multi-billion-dollar fines to be levied, even in this case. Google has lots of lawyers, and they'll likely be able to argue in front of a federal judge to be fined a more reasonable amount (such things happen all the time).

But that's not the point. The point is, in the FTC case, the fine could be large enough to make Google worried. It is most definitely not a dime and a penny. The fine is so daunting that it will force Google to mend its ways, and to think two (or three) times about trying to do anything similar in the future.

Which is the whole point of fines in the first place: to change people's (and corporations') behavior to avoid getting pinched financially.

-- Chris Weigant


Follow Chris on Twitter: @ChrisWeigant


One Comment on “Google's Fine”

  1. [1] 
    dsws wrote:

    Profit is too volatile a number. Base it on a weighted average of revenue, book value, market value, and profit.

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